Motor Accident Claim: No Deduction Of Employer-Provided Group Insurance Benefits From Compensation, Reiterates Supreme Court

The Supreme Court has reiterated that amounts received by claimants under employer-provided group insurance schemes or other social security benefits cannot be deducted from compensation awarded under the Motor Vehicles Act, 1988.

A bench comprising Justices Pankaj Mithal and Prasanna B. Varale dismissed the batch of appeals filed against the Kerala and Karnataka High Courts' judgment, which had disallowed the deduction of the benefits received by the claimants under the Group Insurance Schemes, upon the death of the deceased, from the amount of compensation awarded under the Motor Vehicle Act.

Affirming the High Courts' ruling, the Court observed that benefits received out of the social security schemes are not 'pecuniary benefits', therefore cannot be deducted from the motor vehicle compensation.

Rejecting the appellants' contention that claimants would receive “double benefit”, the Court held that employer-provided insurance benefits arise out of an independent contractual relationship and lack nexus with statutory compensation under the Motor Vehicles Act. Relying on precedents such as Helen C. Rebello v. Maharashtra SRTC, Patricia Jean Mahajan and Sebastiani Lakra, the Court emphasized that only such pecuniary advantages which have a direct correlation with the accident can be deducted.

“It is clear that amounts received by the dependants of the deceased under employer-provided group insurance or other contractual or social security benefits cannot be treated as “pecuniary advantages” liable to be deducted from compensation awarded under the Motor Vehicles Act, 1988. Such benefits arise out of an independent contractual relationship and lack the requisite nexus with the statutory compensation payable for death in a motor vehicle accident.”, the Court observed.

In both appeals, the Motor Accident Claims Tribunal (MACT) had deducted the employee group insurance scheme benefits received by the claimants, upon the death of the deceased, from the motor accident compensation amount.

Aggrieved by the MACT's decision, the appeals were filed before the High Courts, which had set aside the deduction made by MACT under the employee group insurance scheme, leading to appeals before the Supreme Court.

Before the Supreme Court the issue was “Whether the compensation receivable by the claimant through the security of Group Insurance Scheme provided by the employer securing for the employee without his (employee) contribution arising from the same incident i.e. motor accident be allowed to be deducted or not.”

Dismissing the appeals, the judgment authored by Justice Varale justified the High Courts decision, upon placing reliance on Sebastiani Lakra vs National Insurance Co. Ltd, (2019) 17 SCC 465, where it was held that “deductions cannot be allowed from the amount of compensation either on account of insurance, or on account of pensionary benefits or gratuity or grant of employment to a kin of the deceased.”

“The main reason is that all these amounts are earned by the deceased on account of contractual relations entered into by him with others. It cannot be said that these amounts accrued to the dependants or the legal heirs of the deceased on account of his death in a motor vehicle accident. The claimants/dependants are entitled to "just compensation" under the Motor Vehicles Act as a result of the death of the deceased in a motor vehicle accident. Therefore, the natural corollary is that the advantage which accrues to the estate of the deceased or to his dependants as a result of some contract or act which the deceased performed in his lifetime cannot be said to be the outcome or result of the death of the deceased even though these amounts may go into the hands of the dependants only after his death.”, the court quoted the observation from Sebastiani Lakra (supra), pointing out that “the principle of balancing loss and gain cannot therefore be invoked to diminish the statutory entitlement of the claimants to just compensation.”

Accordingly, the appeals were dismissed.

“...we find no grounds to interfere with the approach adopted by the High Court in both matters in setting aside the deductions made by the Tribunal towards the group insurance amounts and in reassessing the compensation payable to the claimants. The impugned judgments of the High Court are consistent with the settled jurisprudence governing motor accident compensation and warrant no interference by this Court.”, the court held.

The bench also rejected procedural objections regarding non-impleadment of the driver, reiterating that motor accident claims are summary proceedings aimed at advancing social justice and should not be defeated by technicalities.

Upholding the High Court's approach, the Court affirmed that deductions towards group insurance were impermissible and directed compliance with the awarded compensation within six weeks. The appeals were accordingly dismissed.

Cause Title: THE MANAGING DIRECTOR, KSRTC VERSUS P. CHANDRAMOULI & ORS. (with connected appeal)

Citation : 2026 LiveLaw (SC) 245

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